Steady Dollar Puts Gold Under Pressure

Gold prices fell on Monday, as the US dollar steadies amid global growth concerns, and as investors awaited signs of rate hikes from the Federal Reserve’s two-day meeting later this week.

Spot gold dropped 0.04 percent to $1,238.01 per ounce, after hitting its lowest since December 4 of $1,232.39 on Friday.

US gold futures were little changed at $1,241.30 per ounce.

Analyst Helen Lau stated that the precious metal has recovered yet from Friday’s decline, adding that prices were moving on the strong dollar over the weekend.

Among other precious metals, spot palladium gained 0.4 percent to $1.251.90 per ounce, while silver futures added 0.1 percent to $14.660 and platinum fell 0.3 percent to $782.80 per ounce.

Firm Dollar Weighs

Weakness in the gold came after disappointing economic data out of China and Europe, as well as fears of a potential US government shutdown prompted investors outside the US to seek the safety of the greenback.

The dollar index, a measure of the greenback’s value against six major currencies, was down 0.03 percent to $96.877 after marking a 19-month high of $97.71 on Friday.

The dollar is clearly showing it is attractive during times of market stress, said head of currency strategy Ray Attrill.

The Australian dollar, which is closely tied to China’s economy, slightly stumbled by 0.04 percent to 0.7174.

The currency shed 0.3 percent of its value last week after data showed China’s November retail sales rose at its weakest pace since 2003 and industrial output grew the least in almost three years, underlining risks to the economy.

Reinforcing signs of cooling global expansion was European Central Bank President Mario Draghi’s statement to the leaders of the European Union (EU). One official said Draghi told the EU leaders that growth was weaker than previously expected and urged them to proceed with reforms of the euro zone.

Fed Policy Meeting

Apart from worries over a global economic slowdown, markets are also keeping a close eye on the likely course of the US monetary policy.

The Federal Reserve is due to hike rates by 25 basis points at its December 18 and 19 meeting. Since December 2015, the central bank has raised rates eight times to bring policy back to more normal settings after having cut borrowing costs close to zero to cope with the financial crisis a decade ago.

Analyst Edward Meir stated that markets will rally on the back of dollar weakness after the central bank signals a more dovish stance, but the advance will fall back quickly as global growth concerns reassert themselves.

Lower interest rates lessen the opportunity cost holding non-yielding bullion and could pressure the dollar.

Spot gold is biased to break support at $1,232 an ounce, and fall to a lower support zone of $1,224-$1,228, according to technical analyst Wang Tao.

Meanwhile, gold speculators switched to net long position in the week to December 11, the first time since July and the strongest since June.

Uncertainties of the trade war are still weighing on the market, said general manager Dick Poon, adding that it is getting close to Christmas time, so it is getting super quiet in the market. Investors reduce their inventories as much as possible before the year ends.

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